Petro SA: Harnessing innovation to sustain energy supply

The oil and gas sector is currently contending with lower prices, which has put cost cutting operational excellence at a premium. Consequently innovation always lurks just beneath the surface and this is perfectly exemplified by PetroSA, an organisation that has had a busy year.

petro-saLast August the state-owned company launched its new geosciences facility in Cape Town, with the site boasting a state-of-the-art geoscience collaboration, visualisation and technology centre that will help guide its oil and gas explorations while providing a training ground for South Africa’s next generation of upstream professionals.

The facility cost around R15 million to build and is equipped with the latest visualisation and collaboration equipment, the Ulwazi Collaboration and Visualisation Centre takes seismic and geological data and translates them into detailed, 3D views of subsurface formations.

The site is like no other in South Africa and it was reported last year that it will be used by PetroSA’s upstream asset teams in their search for and development of oil and gas prospects, enabling them to make quicker and better informed decisions on how to develop the company’s upstream assets.

Such innovation is par for the course for a company that in its own words “continues to play an instrumental role in the country´s transformation through a range of activities that span the petroleum chain. Starting with the exploration and production of oil and natural gas, we sell petrochemical products to South Africa´s major oil companies and export petrochemical products to the international markets.

The corporate website underlines the importance of Petro SA’s forward-looking approach, which has led to world-wide acknowledgement: “Our talent for innovation is recognised globally. In 1992, we started operating the world´s first gas-to-liquid (GTL) refinery at Mossel Bay. It remains the third largest GTL refinery among the five now operating worldwide. Here, our specialist teams produce some of the cleanest fuels on the market using some of the most environmentally friendly processes ever developed.”

The company’s Annual Report for the 2013/14 financial year, reflects the challenges that the business faced, whilst still recording an operating profit:

“PetroSA, South Africa’s National Oil Company (NOC), has recorded a solid performance in a challenging 2013/14 financial year that saw the NOC achieve  an operating profit before impairment of R2.2 billion (2012/13: R983 million).

“The R3.4 billion impairment charge was against the NOC’s onshore and offshore assets, resulting in an overall net loss of R1.65 billion. This is the result of a volatile economic environment; creep in project costs and delays in the feedstock drilling programme (Project Ikhwezi).

“”PetroSA has had a trying year with the main focus being on the sustainability of the refinery, given the declining gas feedstock. The sustainability of our refinery is critical as it not only contributes to the sustainability of our business but also to our total revenue,” Ms Nosizwe Nokwe-Macamo, the PetroSA Group CEO said.  

“Despite a challenging operating environment and tough macro-economic conditions, PetroSA managed to book a 12 per cent increase in revenue to R21.2 billion (2012/13: R18.9 billion). The R2.2 billion operating profit was also the highest the company has achieved in 3 years.

“The better-than-expected revenues were the result of increased local trading of finished products, the good performance of the company’s subsidiary PetroSA Ghana and a positive impact of the Rands 15 per cent weakening against the US Dollar and other major currencies. PetroSA Ghana contributed R328million towards net profit (2012/13: R232 million).”

During the course of the year the company saw significant challenges at the Mossel Bay-based Gas-To-Liquids (GTL) refinery as a result of diminishing gas feedstock.

Petro SA reported that in the 2013/14 financial year the GTL refinery produced 5.8 MMbbls of refined products, 14 per cent below target.  

“The Group experienced a challenging financial year, with lower than expected landed gas, production volumes as well as sales volumes not meeting the expectations of the corporate plan,” Ms Lindiwe Mthimunye-Bakoro, the PetroSA Group CFO said.

“The Board believes that the Group is a going concern and has adequate financial resources to continue operations into the foreseeable future,” she added.

petro-sa-nightThe company site reports: “In an effort to deal with the feedstock challenge, PetroSA has embarked on various initiatives aimed at sustaining the GTL refinery and viability of the company. These include the five-well drilling programme called Project Ikhwezi, the Asset Development Plan, an initiative to look at alternatives to sustain the GTL refinery, and a project to import Liquefied Natural Gas to South Africa.

“The company has also embarked on a rigorous cost optimisation initiative that seeks to realise a R1 billion permanent cost saving per annum over the next few financial years.

“During the 2013/14 period PetroSA also made significant strides in reducing fruitless and wasteful expenditure from R31 million in the 2012/13 financial year, to R6 million. Payments to suppliers of goods and services totalled R24.19 billion. The total procurement expenditure for Broad-Based Black Economic Empowerment-compliant companies (as per the codes; level 1-8) equated to R13.93 billion for the period.” (803 words)

Innovation of course requires investment and Petro SA has to look at its operations and finances with a long-term view.
In February of this year news came through that Dutch contractor Jumbo had completed a contract for PetroSA installing a subsea MEG riser on the Ikhwezi development FA platform offshore South Africa.

Last year Fairplayer installed PetroSA’s subsea structures in the Ikhwezi field. Ikhwezi is PetroSA’s plan to prolong the life of the Mossgas Gas-To-Liquids plant near Mossel Bay by tapping into gas reserves of the F-O field.

Speaking at the launch, PetroSA Group CEO Nosizwe Nokwe-Macamo said the facility would ensure that “collaborative, multi-disciplinary evaluations of new drilling information and drilling events are done efficiently prior to responding to the event.

Petro SA has come a long way since its inception in 2002; its success remains an important component to the future of South Africa’s long-term energy supply.